Ireland hammered by debt downgrade
Aug 27, 2010
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After weeks of investor uncertainty, Standard and Poor's, the influential credit-rating agency, has downgraded Ireland's sovereign debt to 'AA-'. The ratings cut came about thanks to the agency re-evaluating the eventual cost to the Irish government of repairing the banking sector. It's now up to €90bn from €80bn.
The agency specifically highlighted the recent announcement of fresh capital injections into Anglo Irish Bank Corp as a trigger for the downgrade. It now estimates that Ireland's net government debt will rise to 113% of GDP in 2012. That's a debt burden far above former Eurozone AA peers, such as Spain and Belgium.
What the commentators said
The downgrade is a "hammer blow", said Emmet Oliver in the Irish Independent. International investors will "steer clear of the country" and borrowing costs will rise. Ireland will have to pay "an awful lot more in interest payments", said Brenda Kelly at CMC Markets.
That will worsen "Ireland's financial headache", agreed Reuters' John Stonestreet. But it's not a surprise. The agencies have been "hacking away" at Ireland's credit rating for the last few months.
And with the cost of insuring Irish sovereign debt rising in recent weeks, this downgrade is merely "a confirmation of what the market has already seen", concluded Markit's Otis Casey.
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